Bad weather conditions across India, the second largest producer of cotton, could affect a slump in the cotton harvest which might put an upward pressure on the cotton prices globally. The worst monsoons since 2009 in India will put curbs in planting of cotton that is to start from beginning of October.  This alarming situation may cut down the Indian exports for the first time in three years. Earlier the Indian government had put a ban on the exports of cotton when the shipment surged more than the 8.4 million bale surplus. Soon after the protests from growers and traders the ban was lifted again.

The monsoon that accounts 70% of the Indian rainfall has dropped by 17 percent since the beginning of June and has hindered harvesting of agro commodities from rice to cotton. More than 50 percent of total farm land in India is threatened by these dry conditions. Gujarat, that is the largest producer of cotton, for India has witnessed rainfall as much as 81 percent below a 50 year average.

According to an analyst at Standard Chartered Plc, the global outlook for the 2013 suggests that the global supply might squeeze due to competition for acreage from crops like soybean and the weakest monsoon in India since 2009. Gujarat alone will see a slump in the plantation area by nearly 25% of the total 3 million hectares of land. Maharashtra and Andhra Pradesh, the second and third largest cotton producing states of India may see a decline in the cultivation of this crop as much as 10 percent.

It is estimated that the global cotton production in this year will drop to 24.878 million metric tons from a record 26.66 million metric tons last year. However China’s massive stock of cotton could significantly lower the demand of cotton. China is the world’s largest importer of cotton and a slump in its demand will be reflected in the global cotton market. Thus, it could again put a downside pressure in the cotton prices.

Note: The blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.